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Taking down the wall: Transition and inequality

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  • Serhan Cevik
  • Carolina Correa‐Caro

Abstract

In this article, we investigate the main determinants of income inequality in the transition countries of Central and Eastern Europe and the Commonwealth of Independent States during the period 1990–2018. To this end, we address a major methodological challenge that lies at the core of the cross‐country literature on income inequality: the potential endogeneity of income per capita, which is largely ignored by most empirical studies. We adopt a two‐pronged empirical strategy by (1) using trading partners’ weighted average real GDP as an instrumental variable and (2) estimating the model via the two‐stage least squares approach for static models and the generalized method of moments estimator for dynamic models. Our empirical findings are consistent with the Kuznets curve that illustrates a nonlinear relationship between income inequality and the level of economic development. We also find that the redistributive impact of fiscal policy is statistically insignificant and taxation and government spending appear to have the opposing effects on income inequality in transition economies over the sample period.

Suggested Citation

  • Serhan Cevik & Carolina Correa‐Caro, 2020. "Taking down the wall: Transition and inequality," Review of Development Economics, Wiley Blackwell, vol. 24(1), pages 238-253, February.
    • Handle: RePEc:bla:rdevec:v:24:y:2020:i:1:p:238-253
    DOI: 10.1111/rode.12637
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    1. Sohag, Kazi & Badur, Mesut M. & Ameer, Waqar & Vilamová, Šárka, 2024. "Does ICT diffusion validate skill-biased technological change hypothesis? Evidence from the post-Soviet countries," Technology in Society, Elsevier, vol. 76(C).
    2. Olga Tsapko-Piddubna, 2021. "Inclusive Growth Policy And Institutional Assessment: The Case Of Central And Eastern European Countries," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 7(2).
    3. M. Mesut Badur & Kazi Sohag & Shawkat Hammoudeh & Gazi Salah Uddin, 2023. "Costs of economic growth: new insights on wealth and income inequalities in the post-communist countries," Post-Communist Economies, Taylor & Francis Journals, vol. 35(8), pages 830-855, November.
    4. Michael A. Nelson & Rajeev K. Goel, 2023. "Spillovers from gender equality onto economic equality: Evidence from 162 nations," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(6), pages 1365-1388, August.
    5. Alina Georgiana Manta & Gabriela Badareu & Inocentiu Alexandru Florea & Anamaria Liliana Staicu & Cătălin Valentin Mihai Lepădat, 2023. "How Much Financial Development Accentuates Income Inequality in Central and Eastern European Countries?," Sustainability, MDPI, vol. 15(18), pages 1-18, September.
    6. Dan Lupu & Liviu-George Maha & Elena-Daniela Viorica, 2023. "The relevance of smart cities’ features in exploring urban labour market resilience: the specificity of post-transition economies," Regional Studies, Taylor & Francis Journals, vol. 57(12), pages 2406-2425, December.
    7. Cevik, Serhan & Jalles, João Tovar, 2023. "For whom the bell tolls: Climate change and income inequality," Energy Policy, Elsevier, vol. 174(C).
    8. Byambasuren Dorjnyambuu, 2025. "A Systematic Literature Review of Income Inequality in Central–Eastern European Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 67(1), pages 1-49, March.
    9. Dorina Lazar & Cristian Marius Litan, 2024. "Inequality, Growth, and Structural Transformation: New Evidence from a Post-communist Economy," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 66(2), pages 236-260, June.

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